What is a spending plan?

Another word for a spending plan is a budget. Whatever you call it, a spending plan is your financial road map. It helps you know how much money you have coming in every month, how you must spend it and how you might be able to save a few dollars. Creating a spending plan gives you a sense of control over your money.

How do I put together a spending plan?

Use this "Spending Plan" worksheet to complete the steps outlined below. Complete a new worksheet whenever your situation changes. 

Step 1: Identify Income

Estimate your monthly income. If your income varies, keep track of it for several months. Then, determine your average monthly income by dividing the total income by the number of months. You may need to estimate what your income will be if you cut back on the hours you work or aren't able to work at all, depending on your medical condition. 

Step 2: List Expenses

Estimate your monthly expenses. You may need to anticipate more money for medical expenses to manage your arthritis. If you aren't sure how much you spend for things such as meals, gas or entertainment, start a spending notebook. Record what you spend on everything for the next two or three months. At the end of that time, add what you have spent, divide the sum by the number of months, and use the results to complete the worksheet.

Step 3: Compare Income and Expenses

Write down your total monthly income (from Step 1) 
Write down your total monthly expenses (from Step 2)
Subtract expenses from income and list amount here 

Step 4: Set Priorities and Make Changes

Do you have money remaining at the end of the month? Congratulations! If you take advantage of this surplus (by putting it into an investment or a savings account, for example), you will be even further ahead. If you came up short, don't be discouraged. Take another look at your spending plan to find places where you may be able to increase your income, cut expenses or both. The rest of this book provides ideas on how to do that.

©2001. National Endowment for Financial Education. All rights reserved.

Note: Certain content areas in this material are current as of the publishing, but legislative and regulatory changes as well as new developments may date this material over time. This content is meant to provide general financial information; it is not meant to be a substitute for or to supersede specific professional or legal advice.